Markets are currently experiencing volatility, with global equities showing relative strength amidst ongoing challenges. Rising interest rates, policy uncertainty, and inflationary pressures continue to shape investor sentiment, while sectors like commodities and digital assets remain resilient.
Key Points:
Market Overview & Macro Themes
- Market Crosscurrents: Current market conditions remain uncertain with high news flow and significant catalysts, such as economic reports, tariffs and geopolitical events, influencing asset prices.
- Bull Market Context: Despite recent volatility, markets remain in a long-term bull trend. The current bull market has lasted 144 months, compared to the 217-month bull market of the 1980s/1990s, showing the persistence of upward momentum.
- S&P 500 Correction: The S&P 500 has declined by 3.1% in March, trading below the 21-day, 50-day, and 200-day moving averages, signaling short-term weakness.
- NASDAQ 100 Pullback: The NASDAQ 100 has corrected 13.7% from its recent high, facing significant pressure under critical moving averages.
- Tech Underperformance: Technology stocks have underperformed, with the NASDAQ 100 relative strength showing weakness since June 2024. This highlights a potential shift away from high-growth tech stocks toward other sectors.
Political & Policy Impact
- Choppy Transition Period: Historically, the first 50–115 days of new U.S. administrations bring market choppiness due to policy uncertainty, and the current period has seen even more pronounced volatility.
- Policy Uncertainty: The index of policy uncertainty remains elevated due to looming tariff concerns, with a key April 2nd deadline approaching for tariff adjustments.
- America First Policy: Trump’s economic advisors are advocating for an “America First” policy, creating significant uncertainty in global supply chains, inflation expectations, and trade dynamics.
Global Markets & Sector Rotation
- Global Outperformance: In 2025, global equities are outperforming U.S. stocks. Japan and the Eurozone have both hit new highs, indicating broader and likely lasting global strength.
- European Breakouts: Germany, Italy, and Spain have recently broken out of long-term stagnation, signaling a potential new growth phase for the Eurozone.
- Argentina’s Economic Recovery: Argentina has undergone significant economic reforms, which initially caused a short-term economic dip but are now leading to lower inflation, job creation, and renewed growth.
- Canadian Market Strength: The TSX (Toronto Stock Exchange) has been more aligned with global market trends, recently trading near its highs, reflecting broader global risk-on sentiment.
- U.S. Underperformance: The MSCI All-Country World ex-U.S. index has outperformed the Equal-Weighted S&P 500, indicating that U.S. stocks are no longer the dominant performer in global markets.
Currencies & Capital Flows
- U.S. Dollar Weakness: Since early 2025, the U.S. dollar has weakened, driving capital flows into European and Japanese and Asian markets.
- Political Impact on Capital Flows: Political instability and policy uncertainty in the U.S. could further accelerate shifts in capital flows toward Europe and Japan.
- Canadian Dollar Stability: Despite ongoing tariff concerns and the upcoming election, the Canadian dollar has tested previous crisis lows and held up.
Interest Rates & Bonds
- Rising Yields: Yields on U.S. Treasury bonds remain in an uptrend, consistently making higher highs and higher lows, signaling continued inflationary pressures and potential economic growth.
- First Rising Rate Cycle in 45 Years: This is the first time in 45 years that interest rates are consistently rising, changing the dynamics of financial markets and altering investment strategies.
- Weak Long-Term Bonds: Long-term U.S. bonds have remained weak, trending lower since 2020, reflecting the growing belief that inflation is not transitory and that longer term rates will remain elevated.
- Impact on Home Prices: Rising interest rates generally depress home prices as borrowing costs increase, and historical data shows real returns on home prices have been flat or negative in similar rising-rate environments.
Equities vs. Bonds & Income Investing
- Equity Outperformance: The S&P 500 continues to outperform bonds, demonstrating stocks’ ability to provide better returns, especially in inflationary environments.
- Dividend Growth Preference: Dividend growth stocks continue to be favored by market participants, offering a better risk-adjusted return than fixed-rate bonds in a rising rate and inflationary environment.
Commodities & Inflation Trends
- Commodity Uptrend: Commodities have been in a sustained uptrend since 2020, with ongoing strength despite rate hikes, signaling inflationary pressures.
- Gold Bull Market: Gold has been in a bull market for 426 days, with historical bull markets lasting significantly longer and achieving greater price increases.
- Silver Strength: Silver is currently trading at highs, up approximately 80% from its long-term moving average, signaling strong investor interest.
- Copper Surge: Copper prices have broken out to all-time highs, supported by global supply shortages and increasing demand, indicating the potential for a sustained bull market.
- Commodities vs. Bonds: Commodities are outperforming bonds, suggesting an inflationary environment that favors tangible assets over fixed-income securities.
Bitcoin & Alternative Assets
- Bitcoin’s Strength: Bitcoin remains in an uptrend against the S&P 500, holding firm through recent pullbacks, indicating ongoing investor confidence in digital assets as an inflation hedge and alternative investment.
Portfolio Strategy & Market Breadth
- Market Breadth Concerns: Market breadth remains a critical factor—when fewer stocks participate in rallies, overall market risk increases.
- Tactical Positioning: Tactical positioning is key, with investors advised to raise cash and tighten stops in weak market conditions to mitigate downside risk.
- Combining Top-Down and Bottom-Up Analysis: A successful investment strategy requires combining top-down macroeconomic analysis with bottom-up security selection to ensure alignment with prevailing market trends.